Descartes Systems Group is on a roll, says Cantor Fitzgerald Canada

Waterloo’s Descartes Systems Group (TSX:DSG, Nasdaq:DSGX) has been on an extended bull run, but Cantor Fitzgerald Canada analyst Ralph Garcea says there is strong evidence that the company will continue to outperform throughout fiscal 2017.
Yesterday, Descartes reported its fourth quarter and fiscal 2016 results. In the fourth quarter, the company earned (U.S.) $5.4-million on revenue of $48.0-million. Though the company’s topline was up just eight per cent over last year’s Q4, it bottom line number was a more than healthy 50 per cent bump.
“Our track record of consistent, profitable investment and growth has helped build a stable and efficient network platform that the global logistics community relies on,” said CEO Ed Ryan. “With our global team of domain experts, a focus on cash generation and our expanded debt facility, we believe we have the right platform and the capital capacity to continue to grow the global logistics network to help our customers meet the challenges of the ever-changing logistics landscape.”
Garcea says the quarter was basically in-line with what he expected. He notes that the company’s balance sheet is especially strong, and supports the prospect of more M&A. The analyst says the company is also being driven by strong regulatory tailwinds.
“We believe that Customs and Regulatory Compliance (CRC) will provide a decade-long secular growth opportunity for DSG,” says Garcea. “The Company is well positioned to capitalize on this globally as its solutions support many global initiatives (both Imports and Exports).”
The analyst says these include new regulations around export filings in the United States and eManifest business in Canada, similar initiatives in Europe, and a new air cargo screening pilot program in the U.S. that is expected to conclude this summer.
In a research update to clients today, Garcea maintained his “Buy” rating and one-year target price of (U.S.) $23.50, implying a return of 32 per cent at the time of publication.